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CA Intermediate · Taxation · Basic Concepts

Mr. Arvind Joshi, a resident individual in Nagpur, had the following for tax year 2026-27: gross total income Rs 9,00,000, which includes long-term capital gain Rs 1,00,000 and ordinary business income Rs 8,00,000. Which of the following correctly identifies how his income is classified in computation?

The business income and the long-term capital gain fall under different heads. Business income goes under profits and gains of business or profession, while the gain is computed under capital gains and can be taxed at a special rate, not exempt.

  1. ABusiness income and capital gains fall under separate heads, and the capital gain is computed under the head capital gains and may attract a special rateCorrect
  2. BAll income is combined under one head, profits and gains of business
  3. CCapital gain is exempt because it is long term
  4. DCapital gain is added to salary head as it is an individual's income

Explanation

Income is classified into heads; business income is under profits and gains of business or profession and long-term capital gain under capital gains. Capital gains are computed separately and may attract special rates. They are not exempt merely because long term, and they are not salary.

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